Thursday, January 31, 2013

Jobless claims up, GDP down, the Great Recovery continues...

It's basic stuff, simple stuff. On the jobless claims:
Initial jobless claims rose 38,000 in the week ended Jan. 26, the most since Nov. 10, to 368,000, the Labor Department reported today in Washington. Economists forecast 350,000 filings, according to the Bloomberg survey median. The increase followed a combined 45,000 drop in the prior two weeks.
At best, what this shows is stagnation in the job market, especially when coupled with the following:
The number of people who continue to collect jobless benefits climbed by 22,000 to 3.2 million in the week ended Jan. 19. The continuing claims figure does not include workers receiving extended benefits from the federal government.

Those who’ve exhausted their traditional benefits and now are collecting emergency and extended payments jumped by about 418,000 to 2.11 million in the week ended Jan. 12.
As to the GDP:
The U.S. economy posted a decline of 0.1% at an annual rate last quarter, shocking experts although there was an expectation that growth would be lower than the 3.1% gain in the third quarter, the government said Wednesday.

It's the first decline in GDP since a -0.3% decline in 2009's third quarter. A survey of economists by Bloomberg had expected growth of 1% in the fourth quarter, held back by a plunge in defense spending and business inventories along with the impact of Superstorm Sandy, among other factors.
Experts are quick to point to point out "factors" in this case, aren't they? But they're much less likely to do this when there's supposed growth. Then, the growth is simply taken as a given, as it was in the previous--the third--quarter of 2012. Look at this chart from Zerohedge:


Those lamenting and blaming the drop in government expenditures for the Q4 GDP numbers ignore  some things:

1) Government expenditures were down for the forth quarters of the previous two years, as well .

2) Exports and Personal consumption numbers are trending down throughout this period (2010 Q4 through 2012 Q4), even though this is a "recovery."

3) The fourth quarter for 2011 pushed up to 4% of the previous one primarily because of an uncharacteristic jump in private inventories (which were down in every other quarter in the period, save one). Take that one element out and the GDP trend looks even worse, probably not even allowing the characterization of "stagnant."

The spin on these GDP numbers in the mainstream media focuses in on the drop in government spending as the problem, essentially arguing that without such a drop, all would be well. But note that this argument requires a rejection of the fundamental premise of "stimulus spending": the multiplier effect. All of the past spending was supposedly revving up the private sector via this effect, where one dollar of government spending would lead to multiple dollars of private sector growth.

And that has simply not occurred. Thus, the economy is almost relying on the government spending as a means of propping it up. This is not 2009 anymore. Those days are supposed to be in the distant past. Yet here were are, with a "new normal" in unemployment of close to 8% and GDP growth that cannot keep pace with population growth and inflation. This is--again--supposedly a recovery.

Cheers, all.

2 comments:

  1. I forget my source, but I have read that if unemployment were calculated as it used to be it would not be in single digits. 22% sticks in my mind.

    But unemployment is still only on piece. I seriously believe that underemployment is even more serious than those listed as unemployed. I am, in my own estimation, hugely underemployed. Colour me sensitive in that regard.

    I spent my afternoon finishing up coding a dialog box for (my) standard annotations in Autocad. Concatenation is a sticky wicket in DCL if you want the dialog to play nice with itself. Ah, but my forehead makes such a poor suppository - I have digressed.

    How do you measure what I could contribute to the GDP if there were work? How many more like me are there, getting older.

    The media has always offered us static analysis, and that is entirely insufficient to make sound decisions about how best to invest one's time. But I still call this a Depression.

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  2. Agreed. Underemployment is a huge problem. And most of the "created" jobs across the last several years involve underemployment.

    Thanks, Roy.

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